TDG changes
Pick any two versions below to diff them.
- Price
- $1197.01 → $1245.00(+4.0%)
- Discount category
- Well below intrinsic value → Below intrinsic value
- Next earnings
- Nov 10, 2026 → Feb 10, 2027
- Next earnings is estimate
- No → Yes
- About
- TransDigm designs and makes highly engineered parts for aircraft, such as actuators and controls, pumps and valves, ignition systems, power devices, sensors, cockpit displays, seat belts and cargo systems. Its parts are on nearly all commercial and military aircraft in service. Most of its products are proprietary, and it focuses on parts that airlines and armed forces must buy again as spare parts for the life of each aircraft. In removed: the nine months to June 27, added: fiscal 2026, added: which ended on September 30, 2026, net sales were removed: $7.57 added: $10.56 billion: about removed: 42% added: 43% defense, removed: 33% added: 32% commercial aftermarket and 23% commercial OEM. Its EBITDA As Defined margin was removed: 52.6% added: 52.7% in removed: this period. added: fiscal 2026. TransDigm buys many companies with proprietary aerospace parts and raises their margins, and it funds these purchases with debt. It returns cash with share buybacks and special dividends.
- Thesis
- The market prices TransDigm lower because of its high debt and the rising cost of that debt, while acquisitions dilute its margin. Total debt rose to removed: $33.5 added: $34.8 billion at removed: June 27, added: September 30, 2026, from $30.0 billion removed: at September 30, 2025, added: a year earlier, after new loans for acquisitions and buybacks. Net interest expense grew removed: about 28% added: to $2.01 billion in removed: the first nine months of fiscal 2026, faster than added: the 20% growth in sales. The EBITDA As Defined margin fell to removed: 52.8% added: 52.7% in removed: Q3 added: fiscal 2026 from removed: 54.4% a year earlier, added: 53.9%, because the newly bought businesses have lower removed: margins. added: margins, and TransDigm added: guides a margin of about 52.0% for fiscal 2027. TransDigm also withdrew from the Stellant purchase in July 2026 because of the long regulatory review. removed: The conflict in added: Fiscal 2026 sales and EBITDA As Defined were above the removed: Middle East softened airline capacity, although TransDigm has seen no large change in added: raised outlook, but the fiscal 2027 outlook expects commercial aftermarket removed: orders. added: growth only in the high single digits. For the gap to close, three things must be true. TransDigm must reach its removed: raised fiscal removed: 2026 added: 2027 outlook of removed: $10.47 added: $11.95 to removed: $10.55 added: $12.15 billion of added: net sales and removed: $5.49 added: $6.195 to removed: $5.55 added: $6.345 billion of EBITDA As Defined. removed: Its fiscal 2027 outlook must show double-digit commercial added: Commercial aftermarket removed: growth. added: sales must grow at least at the high single-digit rate of the outlook. The margins of Jet Parts Engineering, Victor Sierra and Prince & Izant must rise toward the group level, so that debt stays at about the same multiple of EBITDA. The removed: first added: next test is the fiscal removed: Q4 report and the fiscal added: Q1 2027 removed: outlook on November 10, 2026. added: report, expected in February 2027. If these checks pass, the gap can close over the next removed: two to four added: to six quarters. The main risk is that a fall in air travel or higher interest rates hits a company with this much debt.
- Risks
- TransDigm has about removed: $33.5 added: $34.8 billion of debt, more than six times its yearly EBITDA As Defined. Net interest expense was removed: $1.47 added: $2.01 billion in removed: the first nine months of fiscal removed: 2026. added: 2026, and TransDigm expects about $2.26 billion in fiscal 2027. About 75% of the debt has a fixed rate, but new debt costs more than the debt it replaces, and higher rates reduce the cash left for acquisitions and buybacks. About one third of sales come from commercial spare parts, which depend on air travel. The conflict in the Middle East softened airline capacity and traffic in 2026. A recession or a long conflict can reduce flights and spare part orders. About removed: 42% added: 43% of sales come from defense. As a government supplier, TransDigm faces government audits and investigations. Changes in the defense budget, in procurement policy or in the timing of orders can reduce sales and prices. Growth depends on acquisitions. Antitrust reviews can block or delay deals, as with Stellant in July 2026, and new businesses lower the group margin until TransDigm improves them. Stockholders' equity is negative, a deficit of removed: $9.8 added: $10.0 billion at removed: June 27, added: September 30, 2026, because of special dividends and buybacks funded with debt. This leaves little room for error if profit falls.
- Balance sheet
- Cash: removed: $2.8B added: $2.3B Debt: removed: $33.5B added: $34.8B Net debt: removed: $30.7B added: $32.5B EBITDA, last 12 months: removed: $5.3B added: $5.6B Net debt / EBITDA: 5.8× (high) Interest cover: removed: 2.3× added: 2.4× Undrawn credit line: removed: $864M added: $865M Debt due within 12 months: removed: $139M added: $1.0B TransDigm funds itself mostly with debt of its subsidiary TransDigm Inc.: secured term loans, secured notes and senior subordinated notes. No tranche of term loans or notes matures before August 2028. At removed: June 27, added: September 30, 2026, total debt was removed: $33.5 added: $34.8 billion, including issuance removed: costs added: costs, premium and removed: premium, added: the receivables securitization facility, and about 75% added: of gross debt had a fixed rate. Cash removed: liquidity was removed: $3.6 added: $2.28 billion, added: and cash liquidity was $3.14 billion with removed: $864 added: $865 million available on the revolving credit facility. added: The part due within 12 months is the current portion of long-term debt of $147 million and the $873 million of short-term borrowings under the securitization facility, which matures on July 9, 2027. EBITDA is EBITDA As Defined for removed: the 12 months to June 27, added: fiscal 2026, which TransDigm reports as a non-GAAP measure. Interest cover is income from operations divided by net interest expense for removed: the nine months to June 27, added: fiscal 2026. Stockholders' deficit was removed: $9.8 added: $10.0 billion. In removed: July added: fiscal 2026, TransDigm removed: raised its receivables securitization facility to $1.0 billion until July 9, 2027. After the balance sheet date, it paid added: spent about removed: $1.066 added: $4.4 billion removed: in cash for Prince & Izant, added: on acquisitions and added: $2.75 billion on share buybacks, and $3,038 million of its buyback authorization remained at September 30, 2026. In September 2026, it issued $3.0 billion of removed: 2035 added: 6.75% secured notes added: due 2035, and it used the money to buy back added: about $1.8 billion of its removed: 2028 added: 6.75% secured removed: notes. added: notes due 2028. As of removed: Jun 27, added: Sep 30, 2026.
- Checkpoints
- Nov 10, 2026: Fiscal Q4 2026 results and fiscal 2027 outlook. removed: Pending. added: Failed. Watch: Fiscal 2026 results within the raised outlook and a fiscal 2027 outlook with double-digit commercial aftermarket growth pass; a lower outlook or a margin below 52% fails. added: Outcome: Fiscal 2026 sales and EBITDA As Defined were above the raised outlook and the fiscal 2027 margin guide is about 52.0%, but the fiscal 2027 outlook expects only high single-digit commercial aftermarket growth. Feb added: 10, 2027 (estimate): Fiscal Q1 2027 results: margins of new businesses. Pending. Watch: A group EBITDA As Defined margin that rises again as the new businesses improve passes; a further fall in margin with higher interest costs fails. added: Nov 2027 (estimate): Fiscal 2027 results against the outlook. Pending. Watch: Net sales and EBITDA As Defined within or above the fiscal 2027 outlook of $11.95 to $12.15 billion and $6.195 to $6.345 billion pass; results below the outlook fail.
- Recent events
- Nov added: 10, 2026: TransDigm reported fiscal Q4 2026 results. Net sales rose 23% to $2.99 billion, with 14% organic growth. Net income fell 4% to $586 million because of higher interest and tax expense, and adjusted EPS rose 15% to $12.44. The EBITDA As Defined margin was 53.0%, compared with 54.2% a year earlier. Fiscal 2026 net sales rose 20% to $10.56 billion, and adjusted EPS was $41.35. In the quarter, TransDigm bought back 820 thousand shares for $943 million, at an average of $1,150 per share. For fiscal 2027, it guides net sales of $11.95 to $12.15 billion, EBITDA As Defined of $6.195 to $6.345 billion, a margin of about 52.0% and adjusted EPS of $47.09 to $47.94. It expects high single-digit growth in commercial aftermarket and defense revenue. Nov 2, 2026: TransDigm said that it will report its fiscal Q4 2026 results before the market opens on November 10, 2026, with a conference call at 10:00 a.m. Eastern Time. Sep 28, 2026: TransDigm completed the purchase of Prince & Izant, a maker of brazing alloys and special metal parts for aircraft engines and other uses, for about $1.066 billion in cash from cash on hand. Sep 28, 2026: TransDigm issued $3.0 billion of 6.75% senior secured notes due 2035, up from a planned $2.5 billion. It uses the money to buy back all of its 6.75% secured notes due 2028 in a tender offer, and for general purposes. Sep 21, 2026: TransDigm's unit Extant Aerospace agreed to buy a portfolio of rotorcraft, land systems and business jet products, with a plant in California, for about $240 million in cash. It expects to close the deal in fiscal 2027. Aug 4, 2026: TransDigm reported fiscal Q3 2026 results. Net sales were $2.74 billion, up 23%, with 13% organic growth. Adjusted EPS was $10.87, up 13%. Commercial aftermarket sales grew 17%. TransDigm raised its fiscal 2026 outlook to net sales of $10.47 to $10.55 billion and adjusted EPS of $40.62 to $41.46. It bought back $1.0 billion of shares in the quarter at an average of $1,208 per share. Jul 13, 2026: TransDigm withdrew from its planned $960 million purchase of Stellant Systems. It said that the regulatory review was uncertain and would take too long compared with the time limit in the agreement. May 5, 2026: TransDigm reported fiscal Q2 2026 results and raised its fiscal 2026 outlook. Apr 17, 2026: TransDigm added $1.5 billion of debt: $500 million of 6.125% senior subordinated notes due 2034 and $1.0 billion of term loans due 2033. The money paid for about $800 million of share buybacks in March 2026 and for the Stellant purchase, which TransDigm later dropped.